NAB faces protest vote

National Australia Bank
finance director
Mark Joiner
’s bid to be re-elected to the board will face a no vote from major institutional shareholders, who plan to send a strong message to the bank’s chairman,
Michael Chaney
, that they are unhappy with its poor performance.

Mr Joiner is expected to survive the protest vote at NAB’s annual general meeting on Thursday, thanks to a large number of retail shareholders and foreign institutions who generally vote in line with the bank’s recommendation.

A material no vote would send a clear message to the NAB board about shareholder dissatisfaction.

NAB’s total shareholder returns have continually lagged the other big four domestic banks over the past decade.

Since the start of this year, NAB’s share price is up 5 per cent, compared to rises of 29 per cent for Westpac Banking Corp, 24 per cent for Commonwealth Bank of Australia and 21 per cent for ANZ Banking Group.

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Mr Chaney has held separate meetings over the past two weeks with leading funds management groups understood to include AMP, BlackRock, BT Investment Management, Colonial First State, Macquarie, Perpetual and Schroder Investment Management.

Two major local funds management institutions confirmed to The Australian Financial Review that they were voting against Mr Joiner’s re-election.

The fund managers did not want to be identified publicly.

Market sources familiar with the situation said at least five domestic institutional shareholders intended to vote against Mr Joiner, who is also the bank’s chief financial officer.

Retail shareholders make up more than 40 per cent of NAB’s shareholder base and Mr Joiner only requires a majority of votes to be re-elected for a second term as an executive director.

CGI Glass Lewis, which advises shareholders on how they should vote, recommended to clients that they vote in favour of Mr Joiner and Mr Chaney.

More than 95 per cent of voting shareholders supported Mr Joiner when he was elected in 2009, or 99 per cent including proxies determined by the chairman.

NAB has 10 non-executive directors, including Mr Chaney.

But some shareholders believe that having two executive directors, chief executive
Cameron Clyne
and Mr Joiner, compromises the board’s independence and its ability to take tough decisions on management at a time when it has not met market expectations.

They believe there is potential for power to be concentrated in the hands of the chairman, chief executive and CFO, given they have the most knowledge of the bank’s inner workings.

Mr Chaney is understood to have told shareholders in recent meetings that it was common to have more than one executive on a company’s board.

Ownership Matters head of research Martin Lawrence, a corporate governance expert, said in Australia the standard model was to have one executive director on the board. “If there is more than one, it is usually the CFO," Mr Lawrence said.

“In the UK, it is common to have two or more executive directors on the board. In the US, it’s relatively common to have more than one executive director."

Analysis by the Financial Review shows of the top 20 ASX companies by market capitalisation, 10 have only the chief executive as an executive director.

Miner Rio Tinto, which is dual-listed on the London Stock Exchange, has three executives on its board and Frank Lowy’s Westfield Group has four executive directors, including his two sons Peter and Steven.

No other big four bank currently has an executive other than the chief executive on the board.

No other big four bank currently has an executive other than the chief executive on the board.

Those objecting to Mr Joiner’s position on the board said they could live with multiple executives on the boards of companies that are performing well.

But they argue it is not good corporate governance for an under-performing company like NAB.

The sentiment indicates some investors have lost faith in Mr Joiner, who has been CFO since 2007, a period in which NAB has confessed to a series of problems, including those in the UK, and it has lagged rival banks.